Trouble at a Victorian prison site has downed the construction arm of Sydney property company St Hilliers, putting at risk 30 projects around the country and up to $300 million in work.

St Hilliers Construction, the construction wing of the St Hilliers Group, was placed in voluntary administration on Tuesday night after talks to refinance a $394 million prison project in Victoria collapsed.

St Hillers is part of the Aegis Correctional Partnership, led by Bilfinger Berger Project Investments and
Commonwealth Bank of Australia
, to extend the Ararat Prison. St Hilliers has placed its project-specific company on that job in liquidation.

Trent Hancock and Michael Hird of Moore Stephens Sydney Corporate Recovery Group were appointed as voluntary administrators.

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In a statement, St Hilliers said the administration would not involve the parent company or the group’s funds management, property development and asset management businesses.

The Australian Financial Review understands that work has stopped on the construction arm’s almost 30 projects around the country, including sites for public housing in NSW, numerous Defence facilities and mining sites in Queensland.

In a statement, St Hilliers said the construction company had folded because of its exposure to debt-guarantees on the 350-bed medium security Ararat Prison. “Negotiations over several months between the Ararat Prison equity investors and its bankers in conjunction with the state of Victoria have failed to reach a definitive agreement for additional funding of approximately $150 million," the statement said.

“The St Hilliers Group could not allow further debts to be incurred without adequate funding. As a ­consequence, the group determined that the only prudent course of action was to cease work on the Ararat ­project and place St Hilliers Construction Pty Ltd into voluntary admini­stration."

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The statement said the administrators would be seeking to “complete viable projects once they assess the position of each of the projects".

The administrators yesterday declined a request for an interview.

St Hilliers Group executive chairman
Tim Casey
said the action was “very regrettable".

“We have over a number of months explored and exhausted all possible avenues to recapitalise the construction business and find a solution to the significant cost and time overruns on the Ararat project. Unfortunately, a solution was not possible under the current regime," Mr Casey said in a statement.

“We will now work actively and constructively with the administrator and all stakeholders to continue all viable projects and to find a way to restructure the construction business going forward."

Mr Casey said that it was “business as usual" for the rest of the group, which he founded in the late 1980s.

The Construction, Forestry, Mining and Energy Union yesterday attacked the consortium and the government for the project’s troubles, accusing the government of demanding variations to the design and then refusing to pay for them.

“St Hilliers have stated they have been trying to negotiate an outcome with the government for months.The government have ignored them and now we’re in chaos," CFMEU state secretary Bill Oliver said.

“The government have failed to reach an agreement on financing this project and they have failed thousands of contractors and workers, both in Victoria primarily and now around Australia."

The union accused the consortium of botching the project’s delivery, including doors and windows that were not fit for the purpose.

Mr Oliver said the issues at Ararat had been known for six months.

“This project has failed for two reasons. Firstly, the government has failed to engage with its partner on the prison project to get the job done," he said. “Secondly, they’ve made the project more expensive, and cost local jobs by sourcing materials from China, which didn’t work.

“It’s got to be remembered that this is a project that hasn’t had a day lost to industrial action, the only ones on strike here are the Baillieu gov­ernment."

The Victorian government maintains it will work with the consortium to deliver the prison.

“Discussions are currently under way with Aegis, the consortium responsible for delivering the project, to ensure this happens," a government spokesman said.

“It has always been and remains the private sector’s responsibility to resolve any funding issues and ensure that it meets its contractual obligations."

The state had meet all its obligations under the contract, the spokesman said.

The Defence Department and the Commonwealth Bank refused to comment. Bilfinger Berger declined to comment, citing confidentiality provisions in the contract with the government.